Stop Letting Customer Demands Run Your Manufacturing Business

Once upon a time, supply-chain management was simple. A customer ordered a product, you kept track of the items sold and ordered enough raw materials for production to keep up with the demand.

Today, customers expect a quicker delivery time, which complicates the restocking of raw materials and production scheduling. The reality is that if we do not respond quickly to a customer’s demand, we could lose their business in the future. As changes are made within your supply chain to accommodate the customer’s demand, a ripple or bullwhip affect occurs, resulting in increased cost and poor customer service.

Who Has the Power?

Here are some indicators to see if this is an issue for your company:

  • Are you oversupplying raw material or finished products as an overreaction to backlogs?
  • Are orders being neglected in an attempt to reduce inventory?
  • Are you unable to fill orders because of ineffective communication between internal departments?
  • Is the communication of raw materials requirements with your suppliers slow?
  • Is your supplier slow to fill your order?
  • Are you ordering large batches of raw materials in an effort to maximize purchase discounts?
  • Is your sales forecast inaccurate, affecting your ordering raw materials and production?

How Manufacturing Resource Planning Software Can Help

Here are some ways software can help reduce the bullwhip effect of letting customer demands run your manufacturing business:

  • Improve information flow. The most obvious way to reduce the bullwhip effect is to improve communication and forecasting along the supply chain. This can be accomplished by providing supply chain managers with access to current sales data. Hopefully, this information will be shared within your ERP system. Many software packages have Manufacturing Resource Planning (MRP) modules that will look at actual orders and compare them with sales forecasts and provide suggestions on raw materials to purchase and produce.
  • Reduce delays along the supply chain. The best way to achieve this is by reducing order-to-delivery time. This also decreases inventory carrying and operating costs as less capacity is needed to respond to fluctuations. If your suppliers and customers can process EDI (Electronic Data Interchange) transactions and your software system can send and receive them, you can reduce the time it takes to place an order with your supplier and fill an order with the customer. In cases where the customer does not have EDI, having a website where the customer can place an order that is integrated with your ERP system will help reduce delays.
  • Create smaller purchase orders. Many software packages’ MRP systems have options to create purchase orders from demand. By reducing the order increments and order “batching,” supply chain managers can concentrate on ordering according to need rather than vendor promotions to reduce costs. The bullwhip effect has a greater cost to the overall organization than any discount achieved from making a bulk order.

Take Back Control

If customer demand runs your manufacturing business and you struggle with responding to the back-whip effect of that demand, you can take control through your utilization of software in your order-to-delivery process resulting in reduced costs and improved customer service.

*Image ©Gusts_Must_be_Ambulatory.JPG: Thwongterry Amplitude_modulation.svg: Toobaz derivative work: Stern [CC-BY-SA-3.0 (], via Wikimedia Commons

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